The Wall Street Journal-20080212-White House Rejects Notion of Adding to Stimulus

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White House Rejects Notion of Adding to Stimulus

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WASHINGTON -- With the ink still wet on a $152 billion government economic-rescue plan, the White House rejected hints from Democrats that more emergency measures may be needed to keep the economy from entering a recession.

President Bush is expected to sign the initial stimulus plan as early as tomorrow. The combination of tax rebates for individuals and investment incentives for businesses cleared both houses of Congress last week. It would also extend the reach of the Federal Housing Administration's home-loan program.

"We think that's an effective stimulus," Edward Lazear, chairman of the White House Council of Economic Advisers, said yesterday of the initial plan. "We think it will have the desired effect. We still think that policy is appropriate, and we'd stick with that."

Democratic lawmakers have suggested that they might push for further steps to accelerate economic growth and cushion the blow of a slowdown. Efforts could include an extension of unemployment benefits, an expansion of food stamps and an increase in federal spending on roads, bridges and other infrastructure.

"Economists believe that this legislation will make a real difference in mitigating our current downturn," Senate Majority Leader Harry Reid (D., Nevada) said of the initial plan. "However, it is far from a panacea, and much more should be done to address our economy's longer-term problems."

Mr. Lazear commented as the White House released the annual Economic Report of the President, which reiterated the administration's optimism that the U.S. will dodge a recession, despite a patch of plodding growth during the first half. The report predicted that gross domestic product will grow 2.7% this year, adjusted for inflation, and 3% in 2009.

"Americans should be confident about the long-term strength of our economy, but our economy is undergoing a period of uncertainty, and there are heightened risks to our near-term economic growth," Mr. Bush wrote in a letter to Congress that accompanied the report.

The report cited the housing downturn and the turmoil in financial markets as primary causes of the broader economic woes.

During debate over the stimulus plan, congressional Democrats fought for an extension of unemployment benefits, a step many economists say would put money into the hands of consumers most likely to spend it quickly. Ultimately they gave in to White House and Republican objections in the interest of winning bipartisan support, but some Democrats still hold out hope that Congress will take further action this year.

Mr. Lazear said it would be "unprecedented" to extend jobless benefits at a time when the unemployment rate is 4.9%. "By anybody's measure, 4.9% is low unemployment," he told reporters. "That doesn't mean we're not worried about people who are unemployed." He predicted that the agreed-upon stimulus package would add 500,000 jobs to the economy this year.

The Congressional Budget Office estimated yesterday that the package will cost $152 billion in the year ending Sept. 30, and an additional $16 billion in fiscal 2009. Through fiscal 2018, however, the plan will generate enough new revenue from corporate taxes to shrink the net cost to $124 billion, the CBO said.